The Confederation of Zimbabwe Industries (CZI) says most businesses that benefited from the Reserve Bank of Zimbabwe (RBZ) auction system have seen improved capacity, product supply, efficiencies, and financial performances.
This comes as the RBZ, in a recent auction update, said total cumulative foreign exchange auction allotments since the inception of the Foreign Exchange Auction System in June 2020 amounted to US$4,121 billion as of December 2023.
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Book NowThe bulk of the funds were allotted towards payment for raw materials, machinery, and equipment as businesses invested in their manufacturing processes.
CZI president, Mr Kurai Matsheza, said the improvements in local product supply showed that companies had been investing in capacity with funds largely from the auction.
“The industry did benefit from the auction money, and we are seeing a number of local products on the shelves with an element of imports.
“If it was much more than that, we would not have seen many imported products and be able to meet that gap,” he said.
The central bank launched the Dutch auction system in June 2020 with the main aim of improving transparency and efficiency in the trading of foreign currency in the Zimbabwean economy.
Additionally, the auction was set up as a price discovery mechanism for the local currency as well as to provide foreign currency to local companies needed for the procurement of raw materials and retooling.
Mr Matsheza said the auction system should continue for businesses to secure the cheaper funds required for working capital.
The Government, through the Industrial Development Policy (IDP) (2024–2030), is projecting a manufacturing growth rate of at least 2 percent per annum, growing manufacturing sector investment by 3 percent per annum, increasing manufactured exports by 10 percent per annum, and increasing the share of manufacturing employment to 20 percent by 2030.
According to securities brokerage firm IH Securities, growth in the manufacturing industry in 2023 saw a marginal lift of 2,2 percent from 1,6 percent registered in the prior year.
IH noted in its recent strategy report that while the companies’ operations continued to be hamstrung by prolonged hours of power blackouts, aggregate capacity utilisation remained buoyant, gaining 70 basis points in the year to 56,8 percent.
The firm said in 2023, the paper, printing, and publishing subdivision saw the greatest increase in output at a 14 percent uplift, while production of non-metallic mineral products and chemical and petroleum products followed, growing by 6,2 percent and 4,5 percent, respectively.
“In 2024, expected improvements in electricity supply and continued investments are expected to aid capacity utilisation to 60 percent,” IH said.
In the 2024 National Budget report, the Government said the manufacturing sector has been recording steady gains in volume and capacity utilisation, as well as an increase in the availability of domestically produced goods on supermarket shelves over the past few years.
It was noted that this is being aided by access to foreign currency through the auction system, throughput from the agricultural sector, improved levels of investment, and access to foreign currency from the market.
The Government also indicated that it was finalising the formulation of the Zimbabwe National Industrial Policy, which will run from 2024 to 2030.
The policy is a successor to the “Zimbabwe National Industrial Development Policy,” which came to an end in December 2023.
The new policy will be aligned with Vision 2030 and international and regional policy frameworks on industrialisation.
It will provide policy guidance on the industrialisation of the economy, focusing on structural transformation of the economy to increase the level of the country’s capacity for value addition and beneficiation.
The objective of the policy is to ensure structural transformation of the economy for employment creation, enhancing the value of exports, complexity, and diversity of the country’s products, which are critical for building resilience and inclusive and sustainable economic growth.
The policy will also promote collaboration between the private sector and institutions of higher learning to come up with innovations and new competitive products, taking advantage of opportunities being unlocked within the African Continental Free Trade Area (AfCFTA).
However, according to the RBZ auction report for December 2023, a total of US$3,909 million was allotted to 228 beneficiaries under the retail foreign exchange auction during December 2023, and the sum of US$12 830 473 was allotted to 263 beneficiaries under the wholesale foreign exchange auction during December 2023.
Total foreign exchange payments for December 2023 were US$685,413 million.
“The bulk of the retail auction allotments during the month of December 2023, at 58 percent, were for payment for raw materials (US$1 489 281) and machinery and equipment (US$763 311).
The remaining 42 percent of the total allotments went towards payment for services (US$474 514), consumables (US$556 276), retail and distribution (US$129 617), pharmaceuticals and chemicals (US$399 609), and manufactured goods (US$96 587).
According to RBZ, the introduction of the wholesale foreign exchange auction, on the back of the liberalisation of the exchange rate, saw the parallel market premium decline from a peak of over 140 percent in May 2023 to around 35 percent in November 2023.
Herald
